Dynamic peg orders in an electronic trading system

ABSTRACT

In order to protect a trading party from predatory trading strategies employed by some market participants, especially during certain periods when quotes for a particular security are experiencing rapid changes or transitions, embodiments of the present invention facilitate and support various new type of trading orders whose booking and execution behaviors are dynamically varied in response to environmental market conditions and/or predefined rules. For example, the orders may be allowed to trade at more aggressive price levels if the market is relatively stable, and the orders can only trade at less aggressive price levels or be automatically suspended or even cancelled when the market is unstable.

CROSS-REFERENCE TO RELATED APPLICATIONS

The present application is a continuation-in-part of U.S. Utilityapplication Ser. No. 16/170,589, titled “DYNAMIC PEG ORDERS IN ANELECTRONIC TRADING SYSTEM,” filed Oct. 25, 2018, which is a continuationof U.S. Utility application Ser. No. 14/799,975 (now U.S. Pat. No.10,185,993), also titled “DYNAMIC PEG ORDERS IN AN ELECTRONIC TRADINGSYSTEM,” filed Jul. 15, 2015, which claims the benefits and priority ofU.S. Provisional Application No. 62/040,493, filed Aug. 22, 2014.

The present application is also a continuation-in-part of U.S. Utilityapplication Ser. No. 15/368,010, titled “SYSTEMS AND METHODS FORPROCESSING FULL OR PARTIALLY DISPLAYED DYNAMIC PEG ORDERS IN ANELECTRONIC TRADING SYSTEM,” filed Dec. 2, 2016.

The present application is further related to PCT InternationalApplication No. PCT/US13/59558, filed Sep. 12, 2013, titled“TRANSMISSION LATENCY LEVELING APPARATUSES, METHODS AND SYSTEMS,” whichin turn claimed priority to U.S. Provisional Application Nos. 61/700,094(filed Sep. 12, 2012), 61/753,857 (filed Jan. 17, 2013), 61/758,508(filed Jan. 30, 2013), and 61/876,200 (filed Sep. 11, 2013).

All of the above-referenced patent applications are incorporated hereinby reference in their entireties.

FIELD OF THE INVENTION

The present invention disclosed herein relates generally to apparatuses,methods, and systems for electronic trading and/or auction. Moreparticularly, the present invention relates to apparatuses, methods andsystems for order book management and trade execution with respect todynamic peg orders and other electronic trading techniques.

BACKGROUND OF THE INVENTION

In the prior, related applications, such as PCT InternationalApplication No. PCT/US13/59558, Applicant disclosed various innovationsrelated to electronic trading and computer-implementedplatforms/infrastructure to facilitate improvements in electronictrading. One goal of such innovations is to reduce or deter predatorytrading behavior so as to maintain a fair marketplace for allparticipants big or small. In particular, it is one object of thoseinnovations and the present invention to minimize or eliminateinformation leakage and the use of the same in unfair trading strategiessuch as order book arbitrage or latency arbitrage.

For example, as previously explained, in the U.S. there is no such thingas a single national security exchange in a single location—instead, anumber of security exchanges exist and operate at different locations.Since numerous trades are executed at some or all of these exchanges atany given moment and it takes time for market data updates to propagateamong the exchanges, the order books of all the exchanges cannot beperfectly synchronized and updated at all times. High-speed traders cantake advantage of quote instabilities, when momentary discrepanciesexist among order books of different exchanges for the same security, toconduct trades at stale price points and therefore reap benefits to thedisadvantage of other market participants. Furthermore, these momentarydiscrepancies can be anticipated before they actually occur by, forexample, receiving and processing real-time low-latency market datafeeds that permit a high-speed market participant to understanddeveloping conditions that typically precede, or are characteristic, ofquote instability.

For another example, the conventional approaches by which order booksare managed could also lead to information leakage. High-speed traderscan use a number of tactics such as small orders or non-firm orders(e.g., “indications of interest,” “discretionary orders,” “negotiableorders,” “non-firm quotations,” or “immediate-or-cancel orders”) toprobe the order books of the exchanges. Once a trade confirmation orother feedback from an exchange indicates the existence of a large,hidden or non-displayed order, the high-speed traders could placeadditional trades to take advantage of such order.

Other problems may also exist with existing electronic trading systems.

SUMMARY OF THE INVENTION

Embodiments of the present invention aim to reduce or eliminate theabove-described problems in electronic trading systems.

In order to protect a trading party from predatory trading strategiesemployed by some market participants, especially during certain periodswhen quotes for a particular security are experiencing rapid changes ortransitions, embodiments of the present invention facilitate and supporta new type of trading orders whose booking and execution behaviors aredynamically varied in response to environmental market conditions.Pursuant to predefined rules for the new type of trading orders, theorders may be allowed to trade at more aggressive price levels if themarket is relatively stable, and the orders can only trade at lessaggressive price levels when the market is unstable.

Dedicated hardware and/or software components of an electronic tradingplatform may screen incoming orders to identify those that qualify forexercising price discretion. Environmental market conditions, such asprice movements at other trading venues, are monitored and used as abasis for varying or limiting price discretion for the qualified ordersduring booking and/or execution.

BRIEF DESCRIPTION OF THE DRAWINGS

Various embodiments of the present invention taught herein areillustrated by way of example, and not by way of limitation, in thefigures of the accompanying drawings, in which:

FIGS. 1A, 1B, 2, 2A, 2B, 3, 4, 5A, and 5B show hypothetical examples 1A,1B, 2, 2A, 2B, 3, 4, 5A, and 5B, respectively, illustrating an exemplaryorder entry and recheck methodology for dynamic peg orders according toembodiments of the present invention;

FIG. 6 is a flowchart illustrating an exemplary process and algorithmfor processing a DPO buy order according to an embodiment of the presentinvention;

FIG. 7 is a flowchart illustrating an exemplary process and algorithmfor processing a DPO sell order according to an embodiment of thepresent invention; and

FIG. 8 schematically depicts an electronic trading platform implementingdynamic peg orders according to one embodiment, and a typical operatingenvironment of such a platform.

DETAILED DESCRIPTION OF THE INVENTION

To further improve the fairness and efficiency of an electronic tradingsystem (such as the TLL/POP facilitated trading platform previouslydisclosed in PCT International Application No. PCT/US13/59558),embodiments of the present invention introduce a new type of tradingorders known as “dynamic peg orders” or “discretionary peg orders” (orDPOs) and related order entry and execution mechanisms. Dynamic pegorders are designed to change their processing and matching behavior inresponse to environmental market conditions. During certainenvironmental market conditions (e.g., during a period of quotestability), a DPO may be willing to trade at a more aggressive price;during other environmental market conditions (e.g., during a period ofquote instability), the DPO may be willing to trade at a less aggressiveprice. The dynamically pegged (or booked) price points for a DPO mayhelp protect the party who submitted the order from predatory tradingstrategies employed by some market participants.

According to some embodiments of the present invention, “dynamic pegorders” (or DPOs) may be limit orders, or unpriced orders, pricedautomatically as determined by the electronic trading system to be equalto the primary quote (or mid, or market, or other predetermined pricepoint) of the “national best bid and offer price” or NBBO (i.e.,“national best bid” or NBB for buy orders, “national best offer” or NBOfor sell orders), up (for a bid) or down (for an offer) to the order'slimit price (or another predetermined price point). According to certainimplementations, a dynamic peg order will execute up/down to themidpoint (or another predetermined price point) against a contra-sideorder priced at the midpoint (or such other predetermined price point)or better, during a period of “quote stability” as determined by theelectronic trading system. More generally, the electronic trading systemmay impose different booking or execution restrictions on a DPO, forexample, by allowing it to execute in a first price range when quotesare unstable and allowing it to execute in a second, more aggressiveprice range when quotes are stable. According to other embodiments,rather than labeling it as a new order type, the order book entries andtrade executions of an exchange may be simply implemented by anelectronic trading system based on the above DPO methodology.

The IEX electronic trading system is an exemplary trading system inwhich the DPOs and related operations may be implemented according toone embodiment of the present invention.

Quote Stability

One example of “environmental market conditions” is a period of “quotestability” which refers to a time period when quotes are stable as thequotations for a symbol or security across many venues are holdingsteady and not changing. Such a period of “quote stability” may bedefined in a number of ways. The restriction related to “quotestability”—that is, requiring either order to be one entered and/ormarketable (i.e., priced at an immediately executable price) during aperiod of “quote stability”—increases the chance that DPOs are executedagainst contra-side orders at more aggressive prices only duringsituations when the market is stable, or at less aggressive prices whenthe quote is not stable, thereby reducing the chance of predatorytrading strategies taking advantage of price dislocations during quoteinstability among the exchanges.

According to one embodiment of the present invention, a period when aquote is “unstable” may be defined as one where:

(# of near side venues)−2×(# of far side venues)>4

Here, for a particular security (e.g., Microsoft common stock MSFT), the“# of near side venues” refers to the total number of markets or tradingvenues (e.g., the 11 stock exchanges) each of which publishes aquotation on the near side of the DPO in question; “# of far sidevenues” refers to the total number of markets or venues each of whichpublishes a quotation on the far side of the DPO in question. The terms“near side” and “far side” are relative to the DPO in question where afar side quotation is on the contra-side of the DPO while the near sidequotation is on the same side of the DPO. For example, for a buy DPO,another bid is on its near side at the NBB while an offer is on its farside at the NBO; for a sell DPO, another offer is on its near side atthe NBO while a bid is on its far side at the NBB. The pronounceddifference between the number of near side and far side quotations is anindication of quote volatility and/or a quote transition underway.

According to another embodiment of the present invention, a period whena quote is “unstable toward the bid” may be defined as one where

(# of NBO venues)−2*(# of NBB venues)>4

Here, the “# of NBO venues” refers to the total number of markets orvenues each of which publishes the NBO quotation for the subject of theDPO in question; the “# of NBB venues” refer to the total number ofmarkets or venues each of which publishes the NBB quotation for thesubject of the DPO in question. It is noted that, while there arecurrently 12 NBBO venues, any number of them from 1 to all 12 could havea quote at the NBBO, that is, at least one quoting at the NBB and atleast one quoting at the NBO (but not necessarily the same venue quotingat both NBB and NBO simultaneously). According to an implementation ofthe present invention, a DPO might trade less aggressively when thequote is leaning in one specific direction (i.e. unstable while leaningin the direction of the order), or it might trade differently when thequote is unstable in either direction.

It should be noted that the above formulae are exemplary methods ofdefining a period of “quote instability” given the current number ofquoting exchanges or venues. Other methods or criteria of determining ordetecting a period of “quote instability” (or conversely, a period of“quote stability”) may also be used.

In one embodiment of the present invention, a dynamic peg order isconsidered “active” when it has just arrived at the exchange or duringan order book recheck (such as the recheck process implemented by IEX'strading system). In both instances the DPO is active when it is testingagainst contra-side orders resting in the order book. In one embodimentof the present invention once the DPO is booked, it is considered“resting” and may be eligible to execute with newly arrived or activecontra-side orders or orders that are testing against or being recheckedagainst the order book.

Active Dynamic Peg Behavior

During order entry of an active DPO, the electronic trading system maytest DPO against the order book (and execute the order) up to theorder's limit or the midpoint, whichever is less aggressive. If anyshares remain, then the DPO may be booked at the primary quote of thecorresponding NBB (for a buy DPO) or NBO (for a sell DPO).

During an order book recheck, the DPO may be invited to execute up tothe midpoint or the DPO limit price (whichever is less aggressive)assuming it is not a period of “quote instability.”

Resting Dynamic Peg Behavior

According to embodiments of the present invention, a resting DPO canrest on the primary quote of NBB (for buy DPO) or NBO (for sell DPO) upto the order's limit. Resting DPOs may execute with active Limit,Market, Midpoint Pegged/Constrained orders and DPOs down/up to theactive buy/sell order's limit, assuming it is not a period of “quoteinstability.”

The hypothetical examples shown in FIGS. 1-5 illustrate the order entryand recheck methodology for DPOs. In each of the tables shown in FIGS.1-4, the first row under the header row shows the national bestbid/offer as well as midpoint prices for a hypothetical stock.

In Example 1A (shown in FIG. 1A), the NBB and NBO are 10 and 14 centsper share respectively, and therefore the NBBO midpoint is 12 cents pershare. A DPO to buy shares at a limit price of 12 cents per share (sameas NBBO midpoint) will be booked at NBB (i.e., 10 cents per share), butthis buy DPO will be willing to recheck up to its limit price of 12cents per share.

According to an alternative embodiment of the present invention, how theDPO is booked may depend on the environmental market conditions. Forexample, during a period of “quote stability,” the DPO to buy shares ata limit price of 12 cents per share may be booked at the NBBO midpointof 12 cents per share; during a period of “quote instability,” this buyDPO may “back off” to the NBB of 10 cents per share.

Similarly, with the same NBBO price points, a DPO to sell shares at alimit price of 12 cents per share (same as NBBO midpoint) will be bookedat NBO (i.e., 14 cents per share), but this sell DPO will be willing torecheck down to its limit price of 12 cents per share. This isillustrated in Example 1B (shown in FIG. 1B). According to analternative embodiment, during a period of “quote stability,” the DPO tosell shares at a limit price of 12 cents per share may be booked at theNBBO midpoint of 12 cents per share; during a period of “quoteinstability,” this sell DPO may “back off” to the NBO of 12 cents pershare.

In Example 2 (shown in FIG. 2), the NBB and NBO are again 10 and 14cents per share respectively, and therefore the NBBO midpoint is 12cents per share. A DPO to buy shares at a limit price of 11 cents pershare (less aggressive than NBBO midpoint) will be booked at NBB (i.e.,10 cents per share), but this buy DPO will be willing to recheck up toits limit price of 11 cents per share. Similarly, a DPO to sell sharesat a limit price of 13 cents per share (also less aggressive than NBBOmidpoint) will be booked at NBO (i.e., 14 cents per share), but thissell DPO will be willing to recheck down to its limit price of 13 centsper share.

If, as shown in Example 2A (FIG. 2A), the NBO subsequently drops from 14to 12 cents per share, causing the NBBO midpoint to drop from 12 to 11cents per share, then the sell DPO (at 13 cents) should be booked at itslimit price of 13 cents per share and willing to recheck to the sameprice point because it has now become less aggressive than the NBO. Thebook entry and rechecking for the buy DPO (at 11 cents) remain the same.The buy DPO book entry (at 10 cents per share) remains the same but willnow be willing to recheck up to 11 cents.

If, as shown in Example 2B (FIG. 2A), the NBB rises from 10 to 12 centsper share, causing the NBBO midpoint to rises from 12 to 13 cents pershare, then the buy DPO (at 11 cents) should be booked at its limitprice of 11 cents per share and willing to recheck to the same pricepoint because it has now become less aggressive than the NBB. The sellDPO book entry (at 14 cents per share) remains the same but will now bewilling to recheck down to 13 cents.

In Example 3 (FIG. 3), the NBB and NBO are again 10 and 14 cents pershare respectively, and therefore the NBBO midpoint is 12 cents pershare. A DPO to buy shares at a limit price of 13 cents per share (moreaggressive than NBBO midpoint) will be booked at NBB (i.e., 10 cents pershare), but this buy DPO will be permitted to recheck up to the NBBOmidpoint of 12 cents per share. Similarly, a DPO to sell shares at alimit price of 11 cents per share (also more aggressive than NBBOmidpoint) will be booked at NBO (i.e., 14 cents per share), but thissell DPO will be permitted to recheck down to the NBBO midpoint of 12cents per share.

For comparison purpose, exemplary behavior of midpoint peg orders (MPOs)are shown in Example 4 (FIG. 4) while the NBB and NBO are 10 and 14cents per share respectively and therefore the NBBO midpoint is 12 centsper share. MPOs are booked, and executable at, the NBBO midpointregardless of quote stability/instability.

Examples 5A and 5B (shown in FIGS. 5A-5B) illustrate another benefit ofthe DPO methodology described above, namely the DPO rule which seeks toprevent execution at more aggressive prices with orders entered or thatbecame marketable during a period of “quote instability.” As shown inExample 5A (FIG. 5A), a hypothetical security is traded on Markets 1-5which all started with the NBB and NBO at 10 and 14 cents per sharerespectively (therefore the NBBO midpoint is at 12 cents per share). Ifsome of the markets (Markets 1-3) experience a change in the NBO from 14to 15 cents per share (commencing a period of quote instability), theNBBO midpoint is anticipated to rise from 12 to 12.5 cents per share.Before the quotes on other markets (Markets 4 and 5) transition,predatory strategies could race to those markets and successfullyexecute orders at the potentially soon to be outdated midpoint of 12cents per share. In contrast, the quote instability period could bedetected by the electronic trading system according to embodiments ofthe present invention which could halt the execution of DPOs againstorders at potentially soon to be outdated midpoints (i.e. moreaggressive prices) entered during the quote transition period, therebydefeating a predatory strategy's attempt at order book arbitrage.However, DPOs may still be permitted to execute at less aggressiveprices, for example at the NBB or NBO during the period of quoteinstability.

Computer-Implementation

The components used to implement embodiments of the present inventionmay be or include a computer or multiple computers. The components maybe described in the general context of computer-executable instructions,such as program modules, being executed by a computer. Generally,program modules include routines, programs, objects, components, datastructures, etc. that performs particular tasks or implement particularabstract data types.

Those skilled in the art will appreciate that the invention may bepracticed with various computer system configurations, includinghand-held wireless devices such as mobile phones or PDAs, multiprocessorsystems, microprocessor-based or programmable consumer electronics,minicomputers, mainframe computers, and the like. The invention may alsobe practiced in distributed computing environments where tasks areperformed by remote processing devices that are linked through acommunications network. In a distributed computing environment, programmodules may be located in both local and remote computer storage mediaincluding memory storage devices.

The computer system may include a general purpose computing device inthe form of a computer including a processing unit, a system memory, anda system bus that couples various system components including the systemmemory to the processing unit.

Computers typically include a variety of computer readable media thatcan form part of the system memory and be read by the processing unit.By way of example, and not limitation, computer readable media maycomprise computer storage media and communication media. The systemmemory may include computer storage media in the form of volatile and/ornon-volatile memory such as read only memory (ROM) and random accessmemory (RAM). A basic input/output system (BIOS), containing the basicroutines that help to transfer information between elements, such asduring start-up, is typically stored in ROM. RAM typically contains dataand/or program modules that are immediately accessible to and/orpresently being operated on by processing unit. The data or programmodules may include an operating system, application programs, otherprogram modules, and program data. The operating system may be orinclude a variety of operating systems such as Microsoft Windows®operating system, the Unix operating system, the Linux operating system,the Xenix operating system, the IBM AIX™ operating system, the HewlettPackard UX™ operating system, the Novell Netware™ operating system, theSun Microsystems Solaris™ operating system, the OS/2™ operating system,the BeOS™ operating system, the Macintosh™® operating system, theApache™ operating system, an OpenStep™ operating system or anotheroperating system of platform.

At a minimum, the memory includes at least one set of instructions thatis either permanently or temporarily stored. The processor executes theinstructions that are stored in order to process data. The set ofinstructions may include various instructions that perform a particulartask or tasks, such as those shown in the appended flowcharts. Such aset of instructions for performing a particular task may becharacterized as a program, software program, software, engine, module,component, mechanism, or tool. A plurality of software processingmodules may be stored in a memory as described above and executed on aprocessor in the manner described herein. The program modules may be inthe form of any suitable programming language, which is converted tomachine language or object code to allow the processor or processors toread the instructions. That is, written lines of programming code orsource code, in a particular programming language, may be converted tomachine language using a compiler, assembler, or interpreter. Themachine language may be binary coded machine instructions specific to aparticular computer.

Any suitable programming language may be used in accordance with thevarious embodiments of the invention. Illustratively, the programminglanguage used may include assembly language, Ada, APL, Basic, C, C++,COBOL, dBase, Forth, FORTRAN, Java, Modula-2, Pascal, Prolog, REXX,and/or JavaScript for example. Further, it is not necessary that asingle type of instruction or programming language be utilized inconjunction with the operation of the system and method of theinvention. Rather, any number of different programming languages may beutilized as is necessary or desirable.

Also, the instructions and/or data used in the practice of the inventionmay utilize any compression or encryption technique or algorithm, as maybe desired. An encryption module might be used to encrypt data. Further,files or other data may be decrypted using a suitable decryption module.

The computing environment may also include other removable/nonremovable,volatile/non-volatile computer storage media. For example, a hard diskdrive may read or write to non-removable, non-volatile magnetic media. Amagnetic disk drive may read from or writes to a removable, non-volatilemagnetic disk, and an optical disk drive may read from or write to aremovable, non-volatile optical disk such as a CD ROM or other opticalmedia. Other removable/non-removable, volatile/non-volatile computerstorage media that can be used in the exemplary operating environmentinclude, but are not limited to, magnetic tape cassettes, flash memorycards, digital versatile disks, digital video tape, solid state RAM,solid state ROM, and the like. The storage media are typically connectedto the system bus through a removable or non-removable memory interface.

The processing unit that executes commands and instructions may be ageneral purpose computer, but may utilize any of a wide variety of othertechnologies including a special purpose computer, a microcomputer,mini-computer, mainframe computer, programmed microprocessor,micro-controller, peripheral integrated circuit element, a CSIC(Customer Specific Integrated Circuit), ASIC (Application SpecificIntegrated Circuit), a logic circuit, a digital signal processor, aprogrammable logic device such as an FPGA (Field Programmable GateArray), PLD (Programmable Logic Device), PLA (Programmable Logic Array),RFID processor, smart chip, or any other device or arrangement ofdevices that is capable of implementing the steps of the processes ofthe invention.

It should be appreciated that the processors and/or memories of thecomputer system need not be physically in the same location. Each of theprocessors and each of the memories used by the computer system may bein geographically distinct locations and be connected so as tocommunicate with each other in any suitable manner. Additionally, it isappreciated that each of the processor and/or memory may be composed ofdifferent physical pieces of equipment.

A user may enter commands and information into the computer through auser interface that includes input devices such as a keyboard andpointing device, commonly referred to as a mouse, trackball or touchpad. Other input devices may include a microphone, joystick, game pad,satellite dish, scanner, voice recognition device, keyboard, touchscreen, toggle switch, pushbutton, or the like. These and other inputdevices are often connected to the processing unit through a user inputinterface that is coupled to the system bus, but may be connected byother interface and bus structures, such as a parallel port, game portor a universal serial bus (USB).

One or more monitors or display devices may also be connected to thesystem bus via an interface. In addition to display devices, computersmay also include other peripheral output devices, which may be connectedthrough an output peripheral interface. The computers implementing theinvention may operate in a networked environment using logicalconnections to one or more remote computers, the remote computerstypically including many or all of the elements described above.

Various networks may be implemented in accordance with embodiments ofthe invention, including a wired or wireless local area network (LAN)and a wide area network (WAN), wireless personal area network (PAN) andother types of networks. When used in a LAN networking environment,computers may be connected to the LAN through a network interface oradapter. When used in a WAN networking environment, computers typicallyinclude a modem or other communication mechanism. Modems may be internalor external, and may be connected to the system bus via the user-inputinterface, or other appropriate mechanism. Computers may be connectedover the Internet, an Intranet, Extranet, Ethernet, or any other systemthat provides communications. Some suitable communications protocols mayinclude TCP/IP, UDP, or OSI for example. For wireless communications,communications protocols may include Bluetooth, Zigbee, IrDa or othersuitable protocol. Furthermore, components of the system may communicatethrough a combination of wired or wireless paths.

Although many other internal components of the computer are not shown ordescribed here, those of ordinary skill in the art will appreciate thatsuch components and the interconnections are well known. Accordingly,additional details concerning the internal construction of the computerneed not be disclosed in connection with the present invention.

In operation, a computer processor or the like in an electronic tradingsystem may be configured with a special set of program instructions torecognize a dynamic peg order (DPO) and automatically perform the orderentry, order book recheck, and trade execution functions consistent withthe methodology described above.

More specifically, FIG. 8 shows a block diagram of an exemplaryelectronic trading platform 100 implementing dynamic peg ordersaccording to one embodiment and a typical operating environment of sucha platform.

The platform 100 allows various market participants to performtransactions relating to one or more items of interest. In someembodiments, the item of interest may be a security (e.g., a stock or abond). In other embodiments, the item of interest may be an eventticket, a ticket for a service, and/or an article for sale. While thedescription below generally considers a security as the item ofinterest, this is only for the sake of convenience. The techniquesdescribed herein are applicable to various different types of items ofinterest identified above.

Typically for a security, at a particular instant of time the platform100 has a price associated with that security. That price may be storedin a memory module 102. Events, such as trading events associated withthe security, can occur at one or more venues such as Exchange A (152),Exchange B (154), and Exchange C (156), which can be trading exchanges,electronic communication networks (ECNs) registered as broker-dealers,alternative trading systems (ATSs) approved by a regulatory agency suchas the U.S. Securities and Exchange Commission, private exchanges orforums for trading securities, generally known as dark pools, and/oralternative display facilities (ADF). The number of venues can be anynumber, e.g., 1, 2, 5, 6, 11, 15, etc. One or more of the events canaffect the price of the security. Therefore, the platform 100 mayreceive data updates about such events from the one or more sources 162,164, 166 through a network 170 (e.g., the Internet, a proprietarynetwork, etc.), so that the platform can update the price of thesecurity using the received event data. Data from differentsources/venues may be received through different networks and/ornetworks of different types. Typically, the events continue to occur astime progresses and, hence, the event data may be received by theplatform 100, via a communication interface 104, on an on-going basis.

After price data for a security (an item of interest, in general) isreceived from a source, that data is typically used to update a price ofthe security, such as in an order book maintained by the platform 100.To this end, the communication interface may store the price data in thememory module 102 and/or may forward that data to a price processor 106.In some embodiments, the price processor 106 can access the receiveddata from the memory module 102. In various embodiments, the priceprocessor computes an updated price for the security using the receivedprice data, and may store the updated price in the memory module 102.

In different embodiments, the price processors 106 may have differentarchitectures. For example, the price processor 106 may include a singleprocessor or may include several processors performing price-updatingcomputations in sequence and/or in parallel. One or more processors canbe general purpose processors and/or specialized processors such as mathco-processors. In some embodiments, one or more processors may includeapplication specific integrated circuits (ASICs) and/or fieldprogrammable gate arrays (FPGAs). The price processor 106 may beimplemented using hardware processors only, using hardware processorshaving embedded software, or using processors executing softwareinstructions accessed from memory.

The platform 100 may also include a communication interface 108 fortrading orders or transaction requests in general to be received fromand/or routed to market participants and/or other venues. An orderprocessor 118 may process the incoming trading orders or transactionrequests, for example, by screening and sorting them into differentorder types. For instance, the order processor 118 may examine neworders to determine whether their content and format meet certainrequirements and whether they qualify as dynamic peg orders or othertypes. With or without being processed by the order processor 118, thetrading orders or transaction requests may be stored in a memory module110.

In general, a matching engine 112, implemented using one or moreprocessors and/or software, matches a transaction request received fromone participant with one or more transaction requests that werepreviously received from one or more other participants. Such previouslyreceived transaction requests may be called orders resting on the orderbook or resting orders, and may be stored in the memory module 110. Anorder resting on the order book may rely on the platform 100 to providethe up-to-date price of a security and, as such, if an order based onthe most up-to-date price is received from a high-speed trader beforethe platform has computed the most up-to-date price, the matching engine112 may match the order using stale price information, giving thehigh-speed trader an undue advantage.

To prevent matching a transaction request based on the latestsecurity-related information with a transaction request based on a staleprice of the security, or to minimize the risk of permitting such anunfair match, the platform 100 may employ an order delaying module 114that delays the transaction requests received by the communicationinterface 108 before they are forwarded to the matching engine 112 formatching (or simply delay the processing of the requests by the matchingengine). The forwarding delay may be introduced using a bufferimplemented in hardware and/or software. The introduced forwarding delaymay be related to the communication delay and the processing delay thatis determined or obtained by the platform 100.

By introducing this forwarding delay and/or additional processing delay,the platform 100 can ensure, or at least increase the likelihood, thatthe price processor 106 has determined the true, up-to-date price of asecurity based on the latest information/data about the security, sothat the matching engine 112 has knowledge of the up-to-date price whenit attempts to match transaction requests. By delaying the requests, theplatform 100 can make the up-to-date price of securities (items ofinterest, in general) available to all participants prior to matchingtheir transaction requests, thereby reducing the likelihood that certainparticipant(s) can take an undue advantage of other participants.

Furthermore, to implement dynamic peg orders in accordance withembodiments described herein, a crumbling quote indicator module 116 mayreceive price data from other exchanges via the communication interface104 and determine, based on the price data and a predeterminedalgorithm, whether a security is experiencing a period of quoteinstability. The result of the determination, such as a CQI signal, maybe fed from the crumbling quote indicator module 116 to the matchingengine 112 to vary the execution and order-book rechecking behaviour ofDPOs.

Exemplary Rules Governing Dynamic Peg Orders

According to a particular embodiment of the present invention, a dynamicpeg order or discretionary peg order may be defined and regulated in anelectronic trading system with a detailed set of rules. For example, itmay be specified that, upon entry, a DPO for a particular symbol orsecurity is priced automatically by the trading system to be equal tothe less aggressive price point of a Midpoint Price or the DPO's LimitPrice (if any). Any unexecuted shares of such order are posted to theOrder Book, priced to be equal to the primary quote or the order's LimitPrice, and is automatically adjusted by the trading system in responseto changes in the NBB (NBO) for buy (sell) orders up (down) to theorder's Limit Price (if any). In order to meet the Limit Price of ActiveOrders on the Order Book, a DPO is allowed to exercise the least amountof price discretion necessary from the DPO's resting price on the NBBOto the less aggressive of the Midpoint Price or the DPO's Limit Price.While exercising price discretion, DPOs may be assigned a new timestampat the discretionary price such that the time priority of the DPOs atthe discretionary price can be determined with respect to other ordersat that price point. After exercising price discretion, the DPOs maymaintain their priority at their resting price.

More specific requirements for a DPO may include:

-   -   (A) Must be a Pegged Order.    -   (B) Must have a “Time In Force” (TIF) of “Market Hours Day”        (DAY), “Good Till Time” (GTT), “Good Till Crossing” (GTX),        System Hours (SYS) inclusive of pre-, post-, and primary session        trading, “Fill or Kill” (FOK) or “Immediate or Cancel” (IOC), as        described in Rule 11.190(c) of IEX Group's “Investors' Exchange        Rule Book” available on the website of U.S. Securities and        Exchange Commission (SEC).    -   (C) Must be IEX Only.    -   (D) May not be an Inter-market Sweep Order.    -   (E) May be submitted with a Limit Price or as an unpriced order.    -   (F) Are eligible to trade only during the Regular Market        Session. As provided in Rule 11.190(a)(3)(D) of IEX Group's        “Investors' Exchange Rule Book,” any Pegged Order, which is        marked DAY, submitted to the trading system before the opening        of Regular Market Session will be queued by the trading system        until the start of Regular Market Session; any Pegged Order,        which is marked with a TIF other than DAY will be rejected when        submitted to the trading system during the Pre-Market Session.        Any Pegged Order submitted into the trading system after the        closing of Regular Market Session will be rejected.    -   (G) May be a Minimum Quantity Order.    -   (H) May be an odd lot, round lot, or mixed lot.    -   (I) Eligible to be invited by the trading system to Recheck the        Order Book to trade against interest resting at the Midpoint        Price as described in Rule 11.230(a)(1) of IEX Group's        “Investors' Exchange Rule Book.”    -   (J) Eligible to exercise price discretion up to the        discretionary price, except during periods of quote instability,        as specified in paragraph (K) below.    -   (K) Quote stability is a measure of whether the exchange or        market center believes the NBB (NBO) for a particular security        is in the process of changing as indicated by its assessment of        relative quoting activity of Protected Quotations at the current        NBBO over a period of time.        -   (i) Quote instability may be determined by the trading            system based on the following factors:            -   (a) The NBB and NBO are the same as the NBB and NBO                one (1) millisecond ago; and            -   (b) The NBBO spread must be less than or equal to the                thirty (30) day median NBBO spread during the Regular                Market Session; and            -   (c) There are more Protected Quotations on the far side;                i.e. more quotes on the NBO than the NBB for buy orders,                or more quotes on the NBB than the NBO for sell orders;                and            -   (d) The quote instability factor is greater than the                quote instability threshold, as defined below.            -   (e) Quote Instability Coefficients. The exchange or                market center utilizes the Quote Instability                Coefficients below:                -   C₀=−2.39515                -   C₁=−0.76504                -   C₂=0.07599                -   C₃=0.38374                -   C₄=0.14466            -   (f) Quote Instability Variables. The exchange or market                center utilizes the Quote Instability Variables defined                below to calculate the current quote instability factor.                -   N. Number of Protected Quotations on the near side                    of the market, i.e. NBB for buy orders and NBO for                    sell orders.                -   F. Number of Protected Quotations on the far side of                    the market, i.e. NBO for buy orders and NBB for sell                    orders.                -   N⁻¹. Number of Protected Quotations on the near side                    of the market one (1) millisecond ago.                -   F⁻¹. Number of Protected Quotations on the far side                    of the market one (1) millisecond ago.            -   (g) Quote Instability Threshold. The exchange or market                center utilizes a Quote Instability Threshold of 0.32.            -   (h) Quote Instability Factor. A proprietary method for                calculating quote instability as defined by the                following formula:

$\frac{1}{1 + e^{- {({C_{0} + {C_{1}N} + {C_{2}F} + {C_{3}N_{- 1}} + {C_{4}F_{- 1}}})}}}$

-   -   (ii) If the trading system determines the NBB for a particular        security to be unstable in accordance with foregoing paragraph        (i), it will trigger a crumbling quote indicator (“CQI”) that        restricts Buy DPOs in that security from exercising price        discretion to trade against interest above the NBB up to and        including the Midpoint Price. If the trading system determines        the NBO for a particular security to be unstable in accordance        with foregoing paragraph (i), it will trigger a CQI that        restricts Sell DPOs in that security from exercising price        discretion to trade against interest below the NBO down to and        including the Midpoint Price.        -   (iii) CQI will remain in effect at that price level for            ten (10) milliseconds.        -   (iv) The trading system will only trigger a CQI on one side            of the market at a time in a particular security.        -   (v) The exchange or market center may modify the Quote            Instability Coefficients and Quote Instability Threshold            from time to time.

Exemplary Processes/Algorithms for DPO Buy/Sell Orders

Referring to FIG. 6, there is shown a flowchart illustrating anexemplary process and algorithm for processing a DPO buy order accordingto an embodiment of the present invention.

In Step 602, a new DPO buy order may be received by an electronictrading platform such as the one illustrated in FIG. 8. The new ordermay be a request to buy a certain amount of a specified security (e.g.,common stock) typically at a specified price point (i.e., Limit Price).For example, the order may be a request to buy 500 shares of IntelCorporation's common stock (ticker INTC) at a Limit Price of $29 pershare. The new order may further specify an order type of “DPO”(“dynamic peg order” or “discretionary peg order”) or simply requestsprice discretion based on environmental market conditions.

In Step 604, the electronic trading platform (or its order processor orthe like) may determine whether the buy order meets the requirements ofa DPO. For example, the platform may parse the order parameters andautomatically perform a compliance check against preset DPO rules. If itis decided in Step 606 that the buy order does not qualify as a DPO,then the DPO buy order may be rejected by the platform in Step 608.

If the buy order qualifies as a DPO, then the platform may attempt toexecute the DPO buy order in Step 610 against corresponding sell ordersavailable on the order book. The matching engine may try to execute thebuy order, for as many shares as possible, at a price point that is thelesser of the DPO Limit Price or the current Midpoint Price. If, afterthis initial execution (Step 610), there are no unexecuted DPO sharesremaining in Step 612, then the DPO buy order is recorded as filled andcomplete in Step 614. Any remaining, unexecuted DPO shares may be bookedin Step 616 at the NBB price point.

In Step 618, it may be determined whether the security of interest is ina period of quote stability. This may be achieved by the tradingplatform monitoring the price movements of the security on the orderbooks of a number of venues or exchanges and triggering a buy-sidecrumbling quote indicator (CQI) in Step 618 a when the price data ofthat security meet predefined conditions.

If the security price is experiencing instability among the venues orexchanges (i.e., not in a period of quote stability), then the exerciseof price discretion by the booked DPO buy order may be limited in Step620. For example, a buy-side CQI indicating instabilities may remain inforce for a predetermined period of time (e.g., a few milliseconds),causing the restriction of price discretion to continue for the sameperiod of time.

When it is confirmed that the security price is in a period of quotestability (e.g., in the absence of a triggered buy-side CQI), the DPObuy order may be executed in Step 622 up to the lesser of the DPO LimitPrice or Midpoint Price. As a result, the buy DPO order is allowed twomodes of price discretion: in a first mode, the price discretion islimited since the quotes are unstable or unsteady; in a second mode, theprice discretion is less restricted since the quotes are more stable.

FIG. 7 is a flowchart illustrating an exemplary process and algorithmfor processing a DPO sell order according to an embodiment of thepresent invention. The process/algorithm shown in FIG. 7 is similar tothe one shown in FIG. 6, except that the parameter ranges are modifiedfor the sell order in Steps 710 and 722.

Corporate Discretionary Peg Orders (C-Peg)

SEC Rule 10b-18 establishes a safe harbor for companies and theiraffiliated purchasers when they repurchase shares of common stock. Solong as a company meets the conditions set forth in Rule 10b-18 during astock repurchase, the SEC will not deem the company or purchasers inviolation of anti-fraud provisions of Securities Exchange Act of 1934.The four main conditions under the Rule 10b-18 safe harbor rule are asfollows: (1) The Manner of Purchase: The issuer or affiliate mustpurchase all shares from a single broker or deal during a single day;(2) Timing: An issuer with an average daily trading volume (ADTV) lessthan $1 million per day or a public float value below $150 millioncannot trade within the last 30 minutes of trading, while companies withhigher average trading volume or public float value can trade until thelast 10 minutes; (3) Price: The issuer must repurchase at a price thatdoes not exceed the highest independent bid or the last transactionprice quoted; (4) Volume: The issuer cannot purchase over 25% of theaverage daily volume.

Although the Rule 10b-18 safe harbor conditions apply directly toissuers (and their affiliated purchasers), issuers typically retainbroker-dealers to conduct buybacks on their behalf subject to therelevant conditions of Rule 10b-18. To ensure compliance with some ofthese conditions under the safe harbor rule, a new type of DPO, known as“Corporate Discretionary Peg Orders” or “C-Peg,” may be implementedaccording to alternative embodiments of the present invention.

According to a preferred embodiment of the present invention, a C-Pegorder for a particular symbol or security may be priced automatically bythe trading system to be equal to the less aggressive of: (a) theMidpoint Price, (b) the last transaction price reported in the tradingsystem (i.e., the “consolidated last sale price”), or (c) the order'slimit price, if any.

The broker-dealer handling issuer repurchase orders with a C-Peg orderwould be responsible for managing compliance with whether thetransaction meets the independence test. A C-Peg order may not peg tothe highest independent bid, even if higher than the consolidated lastsale price. With respect to the first aspect of the timing conditions, aC-Peg order may not execute until after the first trade in the stockduring the day. According to some embodiments, the C-Peg order may ormay not assist the broker-dealer to comply with the other conditionsunder the Rule 10b-18 safe harbor.

According to a particular embodiment of the present invention, a C-Pegorder may be a non-displayed, pegged, buy order that, upon entry intothe electronic trading system, the price of the order is automaticallyadjusted to be equal to the less aggressive of the Midpoint Price, theconsolidated last sale price, or the order's limit price, if any.Furthermore, when unexecuted shares of a C-Peg order are posted to theorder book, the price of the order may automatically adjusted by thetrading system to be equal to and ranked at the less aggressive of oneminimum price variant (“MPV”) than the NBB, the consolidated last saleprice, or the order's limit price, if any (the order's “resting price”).

In order to meet the limit price of active orders on the order book, aC-Peg order may exercise the least amount of price discretion necessaryfrom the C-Peg order's resting price to its discretionary price (i.e.,the less aggressive of the Midpoint Price, consolidated last sale price,or the C-Peg order's limit price, if any), except during periods ofquote instability, when a C-Peg order is only eligible to trade at itsresting price, as discussed further below. When exercising pricediscretion, a C-Peg order may maintain time priority at its restingprice and is prioritized behind any non-displayed interest at thediscretionary price for the duration of that book processing action. Ifmultiple C-Peg orders are exercising price discretion during the samebook processing action, they may maintain their relative time priorityat the discretionary price. In the event the NBB becomes locked orcrossed, C-Peg orders resting on or posting to the order book may bepriced one (1) MPV less aggressive than the locking or crossing price.

The trading system may utilize real-time relative quoting activity ofcertain protected quotations and a proprietary mathematical calculation(the “quote instability calculation”) to assess the probability of animminent change to the current Protected NBB to a lower price (“quoteinstability factor”). When the quoting activity meets predefinedcriteria and the quote instability factor calculated is greater than apredefined quote instability threshold, the trading system may treat thequote as unstable and the crumbling quote indicator (“CQI”) is on atthat price level for two milliseconds, or until the CQI triggers again.During all other times, the quote is considered stable, and the CQI isoff. The trading system can independently assess the stability of theProtected NBB and Protected NBO for each security.

According to one embodiment, when the CQI is on, resting C-Peg ordersmay not exercise price discretion to meet the limit price of an activeorder. However, C-Peg orders are eligible for execution at their restingprice (i.e., one MPV below the NBB) when the CQI is on, if at or belowthe consolidated last sale price and the order's limit price (if any).Therefore, when the quote is determined to be unstable, C-Peg orders areprotected from trading more aggressively at a price that appears to beunstable, and thus imminently stale, between the order's resting priceand the Midpoint Price, if at or below the consolidated last sale priceand the order's limit price (if any).

Consistent with one aspect of the “time of purchases” condition of Rule10b-18, C-Peg orders may not be executable until at least oneconsolidated last sale trade in the security has occurred on the currentday. However, the broker-dealer handling issuer repurchase orders with aC-Peg order would typically be responsible for managing compliance withthe other aspect of the “time of purchases” condition with respect toeffecting transactions ten or 30 minutes prior to the schedule close oftrading or following the close of trading.

Otherwise, C-Peg orders would operate in the same manner as DPOs asdescribed above.

Retail Liquidity Provider (RLP) Orders

According to some embodiments of the present invention, in order toprovide retail investors with access to a trading system's pool ofmidpoint liquidity and to provide enhanced opportunities for meaningfulprice improvement at the Midpoint Price, a trading system may create anew class of market participants, Retail Member Organizations (RMOs),which would be eligible to submit certain retail order flow or “Retailorders” to the system;

According to a particular embodiment, a “Retail order” may be an agencyor riskless principal order that satisfies the criteria of FINRA Rule5320.03, which is submitted by a Retail Member Organization, designatedwith a “Retail order” modifier, and reflects trading interest of anatural person, with no change made to the terms of the underlying orderof the natural person with respect to price (except in the case of amarket order that is changed to a marketable limit order) or side ofmarket, and that does not originate from a trading algorithm or anyother computerized methodology. Retail orders may either beDiscretionary Peg or Midpoint Peg orders with a Time-in-Force of IOC orFOK, and may only be eligible to trade at the Midpoint Price.

According to a preferred embodiment, the trading system may create a newtype of Discretionary Peg order, known as an “RLP order,” that is onlyeligible to execute against Retail orders.

RLP orders in the same security may be ranked and allocated according toprice then time of entry into the trading system. Retail orders wouldseek to execute upon entry into the trading system at the MidpointPrice. RLP orders may interact with Retail orders as follows: A Retailorder will seek to execute upon entry into the trading system at theMidpoint Price against orders resting on the Order Book based onprice/time priority subject to the following: A Retail order to buy(sell) may execute upon entry against sell (buy) orders resting on theOrder Book in the following order: (1) displayed sell (buy) orders atthe NBO (NBB) during a locked or crossed market; (2) non-displayedorders priced to trade at the Midpoint Price; followed by (3) RLP orderspriced to trade at the Midpoint Price.

Assuming the following facts when it is not a period of quoteinstability: (1) NBBO for security ABC is $10.00-$10.10; (2) User 1enters a RLP order to buy ABC at $10.05 for 500 shares; (3) User 2 thenenters an unpriced Discretionary Peg order to buy 500 shares; (4) User 3then enters a Midpoint Peg order to buy 500 shares of ABC at $10.04. Thefollowing examples further illustrate how RLP orders may be handled inan electronic trading systems.

Example 1

RMO enters a Retail order to sell 800 shares of ABC. The order willfirst execute against the full size of User 2's buy order, and thenexecute against 300 shares of User 1's buy order, at which point theentire size of the Retail order to sell 800 shares is depleted. In thisexample the Retail order does not execute against User 3's buy orderbecause the order is not priced to execute at 10.05, the currentMidpoint Price.

Example 2

Assume the same facts above, except that User 2's unpriced DiscretionaryPeg order to buy ABC is for 100 shares. The incoming Retail order tosell 800 shares executes first against User 2's buy order for 100 sharesat $10.05, then against User 1's buy order for 500 shares at $10.05. TheRetail order still does not execute against User 3's buy order becausethe order is not priced to execute at 10.05, the current Midpoint Price.The Retail order is filled for 600 shares and the balance of 200 sharesis cancelled back to the RMO.

Example 3

Assume the same facts as Example 1, except that User 3 enters anon-displayed limit order to buy 300 shares of ABC at 10.05. Theincoming Retail order to sell 800 shares executes first against User 3'sorder for 300 shares (because it has priority over User 2'sDiscretionary Peg order) and then against User 2 for the remaining 500shares, completing the Retail order's 800 share quantity. User 1's buyorder is not executed because it is ranked behind Users 2 and 3.

D-Limit Orders

Orders providing liquidity are subject to potential adverse selection(i.e., being “picked off”) by sophisticated liquidity takers when themarket is in transition. Those market participants or traders with thefastest technology can leverage informational and technology advantagesto trade against liquidity providers. For example, sophisticatedliquidity takers can use advanced technology to identify when the priceof a security is transitioning to a new price level and target a subsetof resting orders at stale prices. However, liquidity makers oftencannot move their quotes or cancel resting orders in time to avoid beingpicked off because of inherent limitations (e.g., throttling, processingtime, etc.) in accessing exchange systems quickly enough. The challengeis particularly acute when attempting to cancel resting orders acrossmultiple symbols. The adverse selection risk can operate todisincentivize liquidity provision, which ultimately reduces pricediscovery in the markets.

According to some embodiments of the present invention, a new non-peggedlit or dark order type, known as a “D-Limit order,” may be created in anelectronic trading system. The D-Limit order may be automaticallycancelled or repriced (e.g., 1 MPV away from a CQI price level) duringperiods when the CQI is on (or when the CQI value is at a defined pricelevel). During these times of price uncertainty, it is believed thatthere is not a level playing field with respect to the prevailing priceof the security in question and as a result some market participantsutilize trading strategies designed to target resting orders at staleprices. It is further believed that liquidity providing limit ordersshould not be forced to trade during these periods of price uncertainty.The cancellation or repricing may be generated and processed within thetrading system to provide makers of liquidity protection againstpotential adverse selection as defined by the CQI.

According to particular embodiments, the D-Limit orders can be used byall market participants, at all levels of sophistication andtechnological capability and will be useful to market makers andinstitutional investors providing liquidity alike. While substantiallysimilar to other exchange managed risk settings that cancel or amendorders and quotes on behalf of a member within the trading system underpre-determined (non-public) circumstances, the D-Limit order type may bemore transparent and deterministic since cancellations and reprices arebased on a publicly disclosed formula.

Properly implemented, the D-Limit orders may encourage more restingliquidity by allowing market participants to better manage risk andreduce risk of adverse selection as described above.

While the foregoing description includes many details and specificities,it is to be understood that these have been included for purposes ofexplanation only, and are not to be interpreted as limitations of thepresent invention. It will be apparent to those skilled in the art thatother modifications to the embodiments described above can be madewithout departing from the spirit and scope of the invention.Accordingly, such modifications are considered within the scope of theinvention as intended to be encompassed by the patent claims ultimatelyissued from this application.

1. An apparatus for facilitating dynamic peg orders in an electronictrading system, the apparatus comprising: a first communicationinterface configured to receive a trading order concerning an item ofinterest; a second communication interface configured to receive pricedata of said item of interest from at least one other electronic tradingsystem; a matching engine, operatively coupled to the first and secondcommunication interfaces, configured to vary price discretion of saidtrading order based on the received price data, wherein: the matchingengine prevents execution of said trading order or restricts theexecution to a first pricing range when the received price data indicatean instability in quotes for said item of interest or that said firstpricing range does not satisfy a predetermined pricing condition, andthe matching engine permits execution of said trading order in a secondpricing range when the received price data indicate a stability inquotes for said item of interest and that said second pricing rangesatisfies said predetermined pricing condition, an order delaycomponent, operatively coupled to at least the first communicationinterface and/or said matching engine, configured to impose anadditional latency on an arrival or processing of data signalscontaining incoming trading orders at the matching engine, such thatsaid trading order concerning said item of interest is not processed bythe matching engine before the matching engine has had sufficient timeto receive and process an update of said price data of said item ofinterest, issued prior to issuance of said trading order, from said atleast one other electronic trading system.
 2. The apparatus of claim 1,being further configured to: prevent execution of said trading orderwithin a specified period immediately before end of a trading day. 3.The apparatus of claim 1, being further configured to: prevent executionof said trading order until there has been a first trade of said item ofinterest during a current trading day.
 4. The apparatus of claim 1,being further configured to: calculate a crumbling quote indicator (CQI)value based on a predetermined algorithm and the received price data. 5.The apparatus of claim 1, being further configured to: issue a triggersignal to indicate to the matching engine said instability or saidstability in the quotes for said item of interest.
 6. The apparatus ofclaim 1, being further configured to price said trading orderautomatically, upon entry of said trading order in said electronictrading system, at the less aggressive of: (a) a midpoint price, (b) alast execution price, or (c) a limit price, if any, of said tradingorder.
 7. The apparatus of claim 1, being further configured to bookunexecuted shares of said trading order at the less aggressive of oneminimum price variant than a national best bid (NBB) price, a lastexecution price, or a limit price, if any, of said trading order.
 8. Theapparatus of claim 1, wherein said trading order is for repurchasingsaid item of interest.
 9. The apparatus of claim 1, wherein saidadditional latency is imposed on the transmission of said data signalsby routing said data signals through a physical medium of chosenphysical parameters.
 10. An apparatus for facilitating dynamic pegorders in an electronic trading system, the apparatus comprising: afirst communication interface configured to receive a first tradingorder concerning an item of interest; a second communication interfaceconfigured to receive price data of said item of interest from at leastone other electronic trading system; a matching engine, operativelycoupled to the first and second communication interfaces, configured tovary price discretion of said first trading order based on the receivedprice data, wherein: the matching engine prevents execution of saidfirst trading order or restricts the execution to a first pricing rangeand against an incoming second trading order when the received pricedata indicate an instability in quotes for said item of interest or whenan originator of said second trading order is not a particular type ofparticipant, and the matching engine permits execution of said firsttrading order in a second pricing range and against said incoming secondtrading order when the received price data indicate a stability inquotes for said item of interest and when said originator of said secondtrading order is said particular type of participant, an order delaycomponent, operatively coupled to at least the first communicationinterface and/or said matching engine, configured to impose anadditional latency on an arrival or processing of data signalscontaining incoming trading orders at the matching engine, such thatsaid first trading order concerning said item of interest is notprocessed by the matching engine before the matching engine has hadsufficient time to receive and process an update of said price data ofsaid item of interest, issued prior to issuance of said first tradingorder, from said at least one other electronic trading system.
 11. Theapparatus of claim 10, being further configured to: identify saidoriginator of said second trading order.
 12. The apparatus of claim 10,wherein said particular type of participant comprises one or more retailinvestors.
 13. The apparatus of claim 12, wherein said second tradingorder is limited to execution at a midpoint price only.
 14. Theapparatus of claim 10, being further configured to: issue a triggersignal to indicate to the matching engine said instability or saidstability in the quotes for said item of interest.
 15. The apparatus ofclaim 10, wherein said additional latency is imposed on the transmissionof said data signals by routing said data signals through a physicalmedium of chosen physical parameters.
 16. An apparatus for facilitatingdynamic peg orders in an electronic trading system, the apparatuscomprising: a first communication interface configured to receive atrading order concerning an item of interest; a second communicationinterface configured to receive price data of said item of interest fromat least one other electronic trading system; a matching engine,operatively coupled to the first and second communication interfaces,configured to vary price discretion of said trading order based on thereceived price data, wherein: the matching engine automatically cancelsor revises said trading order or restricts execution of said tradingorder to a first pricing range when the received price data indicate aninstability in quotes for said item of interest, and the matching enginepermits execution of said trading order in a second pricing range whenthe received price data indicate a stability in quotes for said item ofinterest, an order delay component, operatively coupled to at least thefirst communication interface and/or said matching engine, configured toimpose an additional latency on an arrival or processing of data signalscontaining incoming trading orders at the matching engine, such thatsaid trading order concerning said item of interest is not processed bythe matching engine before the matching engine has had sufficient timeto receive and process an update of said price data of said item ofinterest, issued prior to issuance of said trading order, from said atleast one other electronic trading system.
 17. The apparatus of claim16, being further configured to: calculate a crumbling quote indicator(CQI) value based on a predetermined algorithm and the received pricedata.
 18. The apparatus of claim 17, wherein the cancellation of saidtrading order is based on said calculated CQI value.
 19. The apparatusof claim 16, being further configured to: issue a trigger signal toindicate to the matching engine said instability or said stability inthe quotes for said item of interest.
 20. The apparatus of claim 16,wherein said additional latency is imposed on the transmission of saiddata signals by routing said data signals through a physical medium ofchosen physical parameters.